The Hon. Kathiravelu Shanmugam Kugathasan

¶ 01 Hon. Chairman, before I speak on the Ministry of Finance, Planning and Economic Development, let me briefly address the current situation in Trincomalee.

¶ 02 Due to the Ditva cyclone and floods, in Trincomalee District across 11 Divisional Secretariat divisions, approximately 23,000 families—about 75,000 people—have been affected. Of these, around 60,000 people from 18,000 families have stayed with relatives and friends in safe places without moving to shelters; 11,260 people are in 75 temporary shelters. About 620 houses are partially or fully damaged; water entered about 23,000 houses, rendering household items unusable. Roughly 100,000 acres of paddy have been destroyed; thousands of livestock have been swept away.

¶ 03 We thank the Government of India for promptly sending relief to the people of the Eastern Province and the Sri Lankan Government for allocating disaster relief funds. However, there are problems in the last-mile delivery of assistance. For example, in Trincomalee, due to shortage of Grama Niladharis, one officer handles more than one GN division, making it impossible to serve efficiently during a disaster. The Government should urgently fill GN vacancies.

¶ 04 Five DS divisions—Muttur, Kuchchaveli, Verugal, Kinniya and Seruvila—are badly affected. Field officers such as Grama Niladharis, Economic Development Officers and Disaster Management Officers are unable to quickly collect data, assess damage and deliver assistance. Officers from other departments should be temporarily attached to support them.

¶ 05 As floodwaters recede, doctors warn of the risk of communicable diseases spreading. The Ministry of Health should place its staff on emergency footing to prevent outbreaks. With thanks to all officials working tirelessly to ease people’s suffering, I now turn to the Budget Heads.

¶ 06 The Finance, Planning and Economic Development Ministry ensures smooth economic functioning through key responsibilities: evaluating and prioritizing funding for public institutions, releasing funds, providing Treasury guarantees, and managing Government borrowing and debt servicing. In Budget 2026, Rs. 344 billion is allocated for recurrent expenditure and Rs. 291 billion for capital, totaling Rs. 635 billion (14.3% of the total), a 0.9% decrease year-on-year, which is a larger real decrease after inflation. This reflects fiscal consolidation and tighter monetary policy aimed at macroeconomic stability, along with an emphasis on investment-led growth.

¶ 07 The Ministry targets economic stabilization and social welfare. Strengthening the ‘Aswesuma’ social protection cash transfer and expanding beneficiaries is welcome. However, in the North and East, there are around 90,000 female-headed households; dedicated measures to include and support them are lacking.

¶ 08 Reducing the Government’s borrowing limit indicates fiscal discipline and could build confidence among international lenders and investors. Notable allocations for credit and support to self-employment and SMEs can spur local growth. Establishing new funds to promote the digital economy and virtual special economic zones could help modernize the country and attract FDI.

¶ 09 Allocating Rs. 2,000 million to integrate domestic tax administration should simplify tax collection and improve efficiency. Efforts to increase revenue through new and revised taxes are vital for fiscal stability. However, concerns remain:

¶ 10 - There are insufficient, clearly earmarked allocations for post-war Northern and Eastern infrastructure and economic recovery, such as accelerated resettlement, job creation and industrialization tailored to these provinces. - New or revised taxes may burden the public and private sector. Increases in income tax and VAT may dampen consumption and savings. Relief measures in the Budget may be insufficient to offset the higher cost of living from tax changes. - Large allocations to the Finance and Defence Ministries could create imbalances, constraining essential social programmes. - Despite fiscal targets, the deficit could remain high, sustaining reliance on borrowing. - The Budget lacks sufficient clarity on incentives to attract and expand private domestic and foreign investment.

¶ 11 Recommendations:

¶ 12 - Consider partially reducing or capping VAT on essential goods to provide immediate relief to consumers. - Prioritize improving compliance within existing tax systems over introducing new taxes—close leakages and enhance efficiency through digitalization. - Offer targeted tax incentives for new export-oriented industries and IT-enabled services to attract FDI and create jobs. - Further reduce non-essential public expenditure, restrain allocations to high-end Ministries, and cut domestic debt burdens. - Establish transparent, time-bound monitoring frameworks for implementation to curb cost overruns and corruption. - Accelerate e-government to reduce operating costs and improve service delivery. - Increase foreign exchange via new trade agreements and concessional credit lines for exporters; mobilize diaspora and private investment support. - Ensure capital spending effectiveness, as current allocations skew to recurrent expenses. Improve project preparation and execution capacity to achieve the stated 4% of GDP capital expenditure target. - Overall, the 2026 Budget strategy of revenue focus, fiscal discipline and prioritizing public investment is clear; success depends on disciplined, transparent implementation. I urge bold, timely action from the Ministry to realize these proposals.